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RSRCHXchange, the marketplace and aggregator for institutional research, has just released headlines from the results of their latest survey on research unbundling which came into effect on January 3rd 2018 across Europe as part of MiFID II.

The survey was conducted in Q2 2018 by polling company Survation, who canvassed the views of 418 respondents from over 30 countries, representing over 350 firms with over $30trn of AUM in aggregate. The survey is the third in a series from RSRCHXchange, following on from similar polls carried out in Q2 2017 and Q4 2016.

The 2018 survey reveals a consensus view that unbundling is going global. 83% of respondents in the US think unbundling will take effect within the next four years and 53% of respondents in Asia expect it to take effect within two years. The smallest firms believe that change will come through regulation, whereas those in the largest firms believe it will be global compliance policies that will be the root cause of the global proliferation.

Attitudes to unbundling in Europe are generally negative but most respondents believe that it is positive for end investors, although negative for research providers and mixed for asset managers themselves. 78% of respondents within Europe thought unbundling was bad for brokers where as 53% felt it was a good thing for investors.

Since the middle of 2017 , the price of written research has generally been under pressure and many respondents believe that the quality of research would suffer as a result. 75% of respondents agree that the current low prices for research are not sustainable.

The impact of research unbundling is being felt by respondents in Europe. Now that they must pay for research, they are receiving less content. 43% of analysts and fund managers feel worse off as a result of reduced access to research and 63% reported taking fewer meetings with sell side research analysts.

The regulation has hit smaller asset managers and small cap companies hardest with 82% believing it would result in reduced coverage for small and midcap stocks. Sponsored coverage is not seen as the solution for improving coverage. Instead, 88% believe market forces would resolve this issue over time versus some of the other short term subsidisation options.

Throughout the survey, responses from individuals at the smallest asset managers vary from those at the largest firms. 45% of respondents from the smallest asset management companies feel worse off as a a result of reduced research access, much more so than their peers at the largest firms.

The survey also found that unbundling has impacted the consumption venues for research with a 50% increase in the use of research aggregators compared to two years ago, with email being dropped in their favour.

Jeremy Davies, Co-Founder of RSRCHXchange, said:

In our third survey, we wanted to explore the globalisation of unbundling, especially now that it is live in Europe. With over 80% of US respondents expecting unbundling to impact their local market within four years, unbundling will be trending for years to come. As it stands today, more than 100 of our client firms are based in the US and so are more than 20% of the 350+ research providers using our RSRCHX platform.

Vicky Sanders, Co-Founder of RSRCHXchange, added:

Our survey was conducted just months after MiFID II came into effect, the biggest change to the research space in decades. It’s clear that its impact has already been felt in this short time but that there is more the industry needs to do to adhere to the rules and adapt to these changes. If the current price of research is not sustainable, what will happen next to help the industry find equilibrium? It’s interesting to see that market forces are supported by asset managers as the solution for other outcomes, such as the reduction in the coverage of small and midcap companies.

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